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1441(c), and they have not addressed whether LTD’s shareholders
were engaged in trade or business within the United States.
Accordingly, we treat the issue as having been conceded by
petitioners. Rybak v. Commissioner, supra at 566. Because LTD
is not eligible for exemption from withholding pursuant to
section 1441(c), LTD is a withholding agent pursuant to sections
1441(a) and 7701(a)(16) and therefore must pay a 30-percent tax
on the dividend.
D. Whether LTD Is Entitled to Deductions
1. Law
A foreign corporation engaged in trade or business within
the United States during the taxable year is allowed deductions
from its section 882(a) income "only if and to the extent that
such deductions are connected with income which is effectively
connected with the conduct of a trade or business within the
United States". Sec. 882(c)(1)(A). The proper apportionment and
allocation of such deductions are determined as provided in
regulations prescribed by the Secretary. Id.
A foreign corporation receives the benefit of such
deductions "only by filing or causing to be filed with the
Secretary a true and accurate return, in the manner prescribed in
subtitle F, including therein all the information which the
Secretary may deem necessary for the calculation of such
deductions". Sec. 882(c)(2); see also sec. 1.882-4(b)(1), Income
Tax Regs. If a true and accurate return is not filed, "the tax
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